Lease leg up

Pallav Pandey

rental housing in India has remained largely ignored and its huge potential has not been exploited fully. A prolonged slowdown, however, has tipped the scales in favour of this segment and rental housing has emerged as a lucrative option for investors and owners both. According to a 2011 survey approximately 24.7 million families lived on rent and if we factor in the emergence of new centres and job creation in urban centres  then the demand is enormous  at present. As  many as 139 million people now count themselves as  internal migrants. This migrating crowd is increasing the demand for rental homes in cities as it makes a lot of financial sense for them against buying a property. It has created a tangible need for accommodation in urban cities with as much as 40 per cent of the urban population living in rented properties in India.  A number of  factors are driving this segment at present. First of all, renting a home in cities  is relatively affordable as rentals are just 1-3 per cent of the value of the property. Lack of buyers in the resale market has also made homeowners explore the renting option to get some monetary compensation from their assets.   Here are some of the top trends that are currently being witnessed in the home rental market in India: 

Bachelor’s accommodation

Bachelor homes such as PGs are gaining more traction due to the ongoing economic growth and proliferation of job opportunities in urban regions. This helps the incoming millennial population to enjoy added benefits like fixed meals, laundry services, etc. while keeping their monthly rentals relatively low. Also, bachelors have a tendency to move to independent houses as they get financially stronger. Similarly, the demand for family home renting is high in top-8 cities in India.

Open houses

Another trend that’s being observed within the industry is the advent of Open Houses. Open houses are the rental properties that are up for exhibition during a particular timeframe. Such properties can be visited by multiple prospective customers at once and give all visitors the complete freedom to conduct their own thorough examination of the property. The demand for open houses can be gauged by the fact that the platforms leveraging the concept in India have been experiencing a consistent month-over-month growth of 20 per cent ever since — or more than 890 per cent growth annually.

Technology and QR Codes

QR codes, something which became popular by making digital payments seamless during demonetisation, are now doing precisely the same in house hunting via digital platforms. They are enabling people to leave their valuable feedbacks on the visited property via smartphone-based application. This data is then used by online platforms to enhance customer experience via other state-of-the-art technologies such as Big Data and Artificial Intelligence. This cutting-edge approach has considerably augmented the home renting experience in urban regions. As the Smart Cities begin surfacing in the home rental market, it will be interesting to watch the dynamism that they’ll bring into the equation. We just have to wait and watch!

DIY Renting

On an average, urban home seekers have to engage with five to six property dealers and checkout 14 properties over a period of 12 days. The ability to examine properties with high-quality pictures in the desired locations, something that’s further coupled with in-app navigation, open house framework, and a broader collection of rentable properties, is giving rise to a new era of DIY renting in India. Given this, urban home seekers are now exploring DIY renting by optimally planning their day, thereby concluding the whole process in one to two days.

Hurdles in growth

• Rent Control Act (RCA) is in favour of tenants and owners are scared of renting. 
• Low rental yields in major markets due to oversupply. Rental yield is just 2-4 per cent in the country, which is the lowest in the world. 
• Non existence of rental management companies (RMCs) that can provide professional management of properties. 
• No clear cut policy at government level to exploit the potential of this segment fully. 

— The writer is CEO & Co-founder, FastFox